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Archive for the ‘Exchange Traded Funds’ Category

In this article I would like to focus on “commissioned based financial advice” and illustrate the negative effects of commissions on your wealth as well as look at alternative means of paying for advice. The Australian financial planning industry was labelled “structurally corrupt” back in 2002 by the head of the Australian Consumers Association and it appears that not much has changed in 2008.

Who owns your financial planner?

Nowadays over 70% of financial planning groups are owned by big financial institutions like fund managers, banks and insurance companies. As a result these planners are the “defacto salesforce” for their employers’ investment products and the independence of their advice is suspect.

This fact was made abundantly clear in ASIC’s 2006 Shadow Shopping Survey on Superannuation Advice. The survey assessed 306 examples of advice given to real customers. Unsurprisingly the results were damning of financial advisers, the survey finding that:

Unreasonable advice was three to six times more common where the adviser had an actual conflict of interest over remuneration (e.g. commissions) or recommending associated products. Where consumers were advised to switch funds, a third of this advice lacked credible reasons and risked leaving the consumer worse off. 16% of advice was not reasonable given the clients needs (as required by law) and a further 3% was probably not reasonable.
Avoid commission driven financial advice

The vast majority of financial advisers in Australia typically receive the 4% – 5% entry fee charged by most managed funds and superannuation funds that they recommend. On top of this entry fee, advisers often charge a percentage based “adviser service fee” as high as 1% – 2% of the account balance annually.

Investors should ask themselves whether the percentage based financial adviser service fees they are paying are justified by the ongoing level of service provided by their financial adviser. I have long been a vocal advocate of ‘ professional dollar based fee for service financial advice’ whereby clients are able to separate their advice from product sales and eliminate product bias.

Pay a professional dollar based fee for service for financial advice

Paying unnecessary percentage based adviser service fees can seriously reduce your portfolio value and your retirement nest egg. Over time the effect of these unnecessary fees is compounded and these fees can make a huge difference in your final result.

You don’t pay your accountant or lawyer an ongoing percentage of the value of your assets for their advice. The same should apply to financial planning advice. Fee for service financial advice is also the only way to ensure unbiased, non-commission driven advice. Potential conflicts of interest arise when a financial adviser is paid by or employed the fund he or she is recommending which can undermine the value and quality of the advice provided. By separating products from advice and paying your financial adviser an hourly or dollar based fee for service, there will be no incentive for your adviser to recommend any investment for any reason other than its investment merit and its suitability for you.

To ensure independent financial advice and to be confident that your financial adviser is working in “your best interest” you need to be the one paying his or her fees and not the providers of products he may recommend. Pay a separate professional fee for advice and execute your own transactions.

Unfortunately these true “fee for service” advisers are difficult to find as they are truly a minority. Why don’t you make it your New Years’ resolution to find out what fees you are paying to your adviser and take the necessary steps to pay a professional dollar based fee for your investment advice. You will be glad you did and richer as a result.

Everybody is aware that the global economy has taken a beating over the recent past. Countless numbers of individuals have seen the value of their holdings depreciate and are now very cautious to place their hard earned savings at the mercy of the stock market. But there is a way to keep risk to a minimum. It is well-known that exchange traded funds are one of the most secure forms of investments due to their flexibility in trading. To keep up to date with the latest market conditions you can sign up for the ETF newsletter.

It can help you to control your exchange traded funds wisely, bringing you better returns. Whether you invest in your local market or the international market you can be one of the many subscribers that have used the advice from the newsletter to minimize potential risk.

Exchange traded funds are a popular choice for countless numbers of investors. They offer a level of protection that is not always available through over forms of investments due to their ability to be bought and sold both during and after a trading day. Your portfolio can be drastically enhanced through tracking the trends of exchange traded funds. It is now possible to lessen the effort and time involved by subscribing to the ETF newsletter.

No matter what index or derivatives your ETFs follow, good newsletter has all the tools that are required to understand the current market conditions. You will be amazed at how you managed to do without it.

As today’s markets dramatically shift, any changes can be understood and used by following the advice in the newsletter. There is no longer any need to make uninformed choices. Our advice has been followed by countless numbers of investors in many different countries doing away with the need for emotional responses to the market.

Professional financial experts help to compile the ETF newsletter allowing you to get tips from people with experience of all levels of financial transactions. An informed choice is always preferential when it comes to the world’s stock markets.

It can offer the opportunity to understand broader market conditions and can help to predict any possible changes in exchange traded funds. For peace of mind and a secure financial future it makes sense to subscribe to a good ETF newsletter. You will find it an essential part of your investing decisions. It can only help to have a positive outcome on your investments.

At this particular time of year you will need to be cautious about the ex-dividends date of any particular mutual funds you are planning to purchase. If you are one that will take kindly to this advice you will avoid a trouble investment trap lying in wait. On that particular day of the ex-dividends day all of the mutual fund owners that are registered are eligible for capital gains distribution.

If it is a case where you do not claim the fund by that date it will be paid to you. Another thing to keep in your mind is the distribution date, anytime after this date you can purchase your shares without the hassle of the net asset value. Between the period of October onwards into December most of the various mutual funds declare their gain on distributions capital gains and also dividends. If it is stock you want to buy you will have no problem doing so. These kinds of distributions do not affect the level of the share price, but if you have mutual funds you will need to think about the distribution impact or share value.

On the day of distribution you will realize that the mutual funds have dropped to level up with the price of the dollar on that day. In the industry this would be called buying dividends, the way how it works is that the funds collected from all the assets sold is added up and reinvested by the fund manager. At the end of the particular year 95% of funds will have to be distributed to capital gains and not reinvested.

You must have heard many financial analyst talking about exchange traded funds or ETF. Most of you who have financial knowledge must know what ETF means and how it operates. For those who don’t know how ETF work here is a quick summary.

ETFs are index funds that trade in a specific stock or a particular commodity. These funds are preferred by the investors because the maintenance cost of these funds is low. Some of the advantages on investing in these funds include:

a) Some exchange traded funds have diversified investments that help in reducing investor risk. There are many ETFs that invest in U.S. treasury that helps in reducing volatility.

b) Most ETFs that are available in the market have low expense ratio. Since the expenses are low they give better returns when compared to other mutual funds available in the market.

c) When you invest in mutual funds you have to keep track of your investments on a regular basis. However, when you invest in an ETF your investment is relatively safe and you don’t have to check the working of the ETF on a regular basis.

d) People who invest in ETF can do so from the account that they have with their broker. Also the minimum quantity that you need to buy is small which reduces your risk. When investing in ETF you are not required to have an account with the fund company. You can invest from your brokerage account and purchase units without going through the formalities of opening an account with the fund company.

However, ETF is not risk free and it will be prudent on your part to do your homework before you invest.

As a budding investor there are two questions that always come up: 1. Where to invest money?, 2. Where to invest money? Let me elaborate. There are many different types of institutions to do your investing business with. There are also different types of investment vehicles that you can use to invest your money. Thus the two questions…Here are my thoughts on answering both.

You cannot answer the 2nd question without answering the first. We must find a business to invest our money with. Here, we go to the internet. There are a lot of reputable stock trading firms that have been in business a long time that you can do business with. Scottrade, TDAmeritrade, Fidelity, Charles Schwab, are a few that come to my mind right away. There are also other companies that are on the internet that you can visit. Companies like, Sogotrade, Etrade, Trademonster, and Firstrade.

They may be newer to the stock trading scene but reputable, nonetheless. There are also online banks that you can open savings accounts with like: ING, HSBC, and Emigrant Direct. How to pick them? Here are some criteria that you should consider: reputation, cost per trade, resources, customer support, user friendly. To do this, you must educate yourself on all the options available before jumping into one that has the coolest TV commercial. Research first, figure out what company to invest your money with, then you can answer the 2nd “Where to invest money?” question.

After answering the 1st “Where to invest money?” question, you now know that you can use the internet to do all your investment education, financing, banking, etc. What kind of investments are there? Well, there are savings accounts, money market accounts, Certificates of Deposits (CDs), corporate bonds, municipal bonds, exchange traded funds (ETFs), stocks, mutual funds (load and no load), Real Estate Investment Trusts (REITs), Government securities, and precious metals.

There are more but you get the idea, there are a lot of vehicles to place your money. The right questions to ask yourself are: How much do I have to invest?, How long do I want to invest it for?, How much return do I want?, and What is my risk tolerance?. Once you answer those questions, you will be able to narrow down your choices. Bottom line is do research and educate yourself before jumping in.

There are many ways to earn more returns for your hard earned money. Do you want to know the ways? If you read this article, you can learn more.

What are Mutual Funds?

This concept was introduced by the experts of Wall Street. They collected money from the public and then invested in the stocks. When they earn money from the stocks, they give dividends for the investors as returns. A lot of business conglomerates in India have their Asset Management Companies in India. Then they launch fund schemes for the investors through New Fund Offer (NFO).

Mutual Funds Investment Advice:
First you should consult a professional consultant who is a well known consultant or a well reputed consultant to you. Most of the consultants might try to sell the products, which gives them high revenue. So you should take their advice as well as spend some time analyzing the funds and their performance. There are lot of websites that would give you latest updates on the schemes, their performance as well as the New Fund Offers. You should keep visiting the websites and keep yourselves updated on the latest information, so that you will not choose the wrong scheme. Once you decide to invest in any particular scheme, and then analyze the performance of the particular scheme for the past 6 months, 1 year, 3 years and 5 years. If the scheme was performing more consistently, then you can surely go investing in that particular scheme.

How to Invest?
You should contact a mutual fund agent and he can guide you for the same. You can also apply for mutual funds online in many of the leading websites.

Next Step: You should read more on fund schemes and then start investing.